U.S. Department of Housing and Urban Development
Office of Housing
Special Attention of: Notice H 96-74
All Housing Directors
All Multifamily Housing Issued: August 28, 1996
Directors; All Asset Management Expires: August 31, 1997
Branch Chiefs; Owners/Managers;
Contract Administrators Cross References: 4350.1, 4350.2
Subject: PROJECT-BASED SECTION 8 CONTRACT EXPIRING IN FISCAL YEAR 97
This guidance implements Section 405(a) of the Continuing
Resolution of January 26, 1996 (CR), concerning the Department's policy
on Section 8 Housing Assistance Payments (HAP) contracts expiring in
Fiscal Year (FY) 1997. It is anticipated that Congress could pass new
or revised language in an FY 1997 Appropriations Act or Continuing
Resolution. However, the January 26, 1996, Continuing Resolution gave
authority to enter into new, contracts for FY 1997 and beyond, and to
ensure timely contract funding, the following procedures implement
existing authority and are outstanding until superseded.
I. WHICH PROGRAMS ARE COVERED?
Until further notice, the policies and procedures described in this
memorandum apply to all project-based Section 8 contracts expiring in FY
1997 and beyond. This includes the following programs: New
Construction/Substantial Rehabilitation (Part 880-881); Loan Management
Set-Aside and Property Disposition Set Aside (Part 886); Housing for the
Elderly (Part 885); Set-Aside for Rural Rental Projects (Part 884); and
State Housing Agency Program for Substantial Rehabilitation Projects
(Part 883). NOTE: This Notice DOES NOT COVER the Section 8 Moderate
Rehabilitation Program.
II. CAN ANY PROVISIONS OF THIS NOTICE BE WAIVED?
The provisions of this Notice supersede your authority under the
delegation to grant waivers, which was published on December 6, 1994, as
the Notice of Revocation and Redelegation of Authority [59 FR 62739].
Therefore, all requests for a waiver from any provisions of this Notice
must receive the approval of the Assistant Secretary for Housing-Federal
Housing Commissioner.
HMHP: Distribution: W-3-1
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III. WHAT IS THE DEPARTMENT'S AUTHORITY TO OFFER PROJECT-BASED
ASSISTANCE IN
FY 1997 AND BEYOND?
A. Section 405 of the January 26, 1996 CR address the issue of
expiring Section 8 Contracts, and are discussed in considerable
depth in Notices 96-7 and 96-51, respectively.
B. Section 405(b) of the CR identified specific procedures, time
restrictions, and rent levels for renewing Section 8 contracts
expiring during FY 1996. Notice 96-7 clarified the statutory
provisions delineated in the CR, and directed that HUD offer
project owners a one year renewal, at current rent levels, for
Section 8 contracts expiring in FY 1996. This directive also stated
that there would be no provision for rent increases in these
renewals.
C. Under Section 405(a) and Section 405(c) of the CR, the Secretary
has the discretion to address project-based Section 8 contracts
expiring in FY 1997 and beyond. As a matter of programmatic
decision-making, the Department has decided to renew contracts
expiring in FY 1997 under the authority granted to the Secretary in
section 405(a). Section 405(a) states:
"For fiscal year 1996 and henceforth, the Secretary of Housing
and Urban Development may use amounts available for the
renewal of assistance under section 8 of the United States
Housing Act of 1937, upon termination or expiration of a
contract for assistance under section 8 of such Act of 1937
(other than a contract for tenant-based assistance and
notwithstanding section 8(v) of such Act for loan management
assistance), to provide assistance under section 8 of such
Act, subject to the Section 8 Existing Fair Market Rents, for
the eligible families assisted under the contracts at
expiration or termination, which assistance shall be in
accordance with terms and conditions prescribed by the
Secretary."
IV. HOW WILL HUD HANDLE EXPIRING SECTION 8 CONTRACTS?
The following guidance is based on our application of Section 405(a) of
the CR. Therefore, until further notice, the policy for all project-
based Section 8 contracts (as identified above) that expire in FY 1997
and beyond shall be as follows:
1. Owners will be offered a new one-year HAP contract. The
Department has developed a standardized form for the new one-
year project-based Section 8 assistance contract (Attachment
1). This document shall be used in all instances where an
expiring project-based Section 8 contract is being replaced
with a new one-year contract;
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2. If the Owner wishes to execute a new project-based section 8
assistance contract, the owner, no more than fifteen (15) days
after contract expiration or termination, must certify to HUD
or other designated contract administrator (as appropriate) in
writing as to the number of eligible families currently
occupying units (The count must not include those tenants
housed under a tenant-based subsidy);
3. At the request of the owner, a new contract will be executed
between HUD and the owner, at rent levels established
according to the following standard:
a. All projects whose current rents exceed 120% of Fair
Market Rents (FMRs), at the time of contract expiration,
will be reduced to 120% of FMRs in a new one-year
contract. There will be no rental adjustments during the
contract year;
b. All projects whose current rents fall below 120% of FMR,
at the time of contract expiration, will be renewed at
their current rents in a one-year contract. For these
projects, there will be a rental adjustment provision to
allow for a rental increase during the one-year term of
the new contract, based on demonstrated need, limited to
5% of the overall budget amount, but not to exceed 120%
of FMRs. Instructions for rental adjustment requests are
set forth in Attachment 4.
4. No later than the commencement date of the new project-based
assistance contract, a new lease should be executed between
the owner and each family who will continue to receive
project-based assistance. The revised Model Lease (Attachment
5) contains amended Termination of Tenancy provisions which
address the one-year contract termination and owner
notification requirements. A new lease is not required if
this language is present in the existing lease.
V. WHAT ARE THE PROJECT OWNER'S NOTICE REQUIREMENTS TO HUD AND THE
RESIDENTS?
A. Background
1. For owner termination or contract expiration, Section 8(c) (9)
of the United States Housing Act of 1937 (42 U.S.C. Sec.
1437f) requires project owners to provide written notice to
HUD and the residents, not less than one year in advance of
the contract termination date, of either the owner's intention
not to continue, or the expiration of, the project's expiring
HAP contract.
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2. For the purposes of 8(c) (9), the term "termination" means the
expiration of the assistance contract or an owner's refusal to
renew the assistance contract. Termination may also include
cessation of the contract for business reasons.
B. Notice of Contract Expiration
Section 8(c) (9) covers all Section 8 HAP contracts. Therefore, for
all project-based Section 8 contracts, the owner, one (1) year
prior to contract expiration, must provide proper notice to HUD and
to all affected households.
C. Notice of Rent Increases
In addition to the One-Year Notice above, the owner, no less than
ninety (90) days prior to the contract expiration date, must notify
each assisted family of any increase in the amount the household
will be required to pay for rent as a result of the expiration of
the assistance contract.
D. If Proper Notice Was Given:
If project-based Section 8 HAP contracts expire and the owner has
given proper notice in accordance with 8(c) (9), HUD shall:
1. Provide one (1) year tenant-based assistance to all eligible
families in residence on the day of contract expiration;
2. The instructions for replacing project-based subsidy with
tenant-based subsidy are included as Attachment 6 to this
Notice. These instructions supersede the guidance found in
Chapter 4 of HUD Handbook No. 4350.2. To ensure adequate
processing time, the process of issuing tenant-based tenant
subsidy must begin 90 days prior to the expiration date of the
project-based contract;
3. In those instances where expiring project-based Section 8 is
replaced with tenant-based subsidy, the tenant-based
assistance shall be administered by the local Public Housing
Authority (PHA) or other designated contract administrator (as
appropriate), and will be monitored by HUD's Office of Public
and Indian Housing as part of their normal oversight
responsibilities.
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E. If Proper Notice Was Not Given
1. If project-based Section 8 HAP contracts expire and the owner
has failed to give proper notice in accordance with 8(c) (9),
owners must choose one of the following two options:
a. Entering into a new, project-based HAP contract for one
year at the rents established by this Notice; or
b. Permit the tenants assisted by the expiring contract to
remain in their units for the one year notice period
without increasing the share of the rent these residents
were paying under the expiring contract.
2. HUD expects that until such time as the owner has met the 8(c)
(9) notice requirements, the owner will not be allowed to
collect from the tenant any more than the total tenant payment
as calculated in accordance with 24 CFR Part 813.
VI. HOW WILL HUD DETERMINE WHO IS ELIGIBLE, I.E. THE NUMBER OF ELIGIBLE
FAMILIES?
Section 405(a) of the CR states, in part, that the new assistance
is "for the eligible families assisted under the contracts at expiration
or termination." Consequently, HUD or other designated contract
administrator (as appropriate) will employ the following standard to
determine the number of eligible families:
1. The new project-based Section 8 contract will be based on the
total number of units in the project that are occupied by
eligible families;
2. The owner, no more than 15 days after contract expiration or
termination, must certify to the Contract Administrator (in
writing) the number of units occupied by eligible families;
3. Upon receipt of the owner's certification of units, the
Contract Administrator will contract for and fund only those
units within the property which meet HUD's Housing Quality
Standards, and which are occupied by families who are eligible
for and receiving assistance at contract expiration or
termination up to a maximum of the total number of units under
the expiring section 8 contract.
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VI. ATTACHMENTS
We have included the following attachments to aid you in
implementing the requirements of this notice:
o Attachment (1) is a new Project-based Section 8 contract which
reflects all of the new requirements. Until further notice,
this new contract shall be utilized in conjunction with all
Project-based Section 8 contracts expiring in FY 1997 and
beyond.
1a. HAP where HUD is CA
1b. HAP where PHA is CA
o Attachment (2) is a revised SAMPLE one-year notification
letter (to be mailed by the Field Office to the owner) to
ensure that the project owner, for contract termination
purposes, has provided adequate notice to HUD and the
residents.
o Attachment (3) is a revised SAMPLE notification letter to the
tenants (to be mailed by the owner). This letter ensures
uniformity among project owners in adhering to the
implementing provisions of this notice.
o Attachment (4) are instructions for processing rental
adjustments up to 5% of overall budget, but not exceeding 120%
of FMRs.
o Attachment (5) is the revised Model Lease. The new lease
contains ended Termination of Tenancy provisions which address
the one-year contract termination/expiration and owner
notification requirements.
o Attachment (6) are instructions for issuing tenant-based
subsidy when project-based contracts expire.
o Attachment (7) is an ACC renewal form.
o Attachment (8) is a SAMPLE letter for residents receiving
vouchers.
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o Attachment (9) is a FACT SHEET for Section 8 Rental Vouchers
for residents and/or public media.
For questions or clarifications concerning this Notice, calls may
be directed to the Program Management Division at 202-708-3944.
Nicolas P. Retsinas
Assistant Secretary for Housing-
Federal Housing Commissioner
Attachments
ATTACHMENT 1(a)
U.S DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
Office of Housing, Federal Housing Commissioner
HOUSING ASSISTANCE PAYMENTS CONTRACT
HUD as Contract Administrator
This Housing Assistance Payments Contract ("Contract") is entered into
between the U.S. Department of Housing and Urban Development ("HUD") and
______("Owner") pursuant to the United
States Housing Act of 1937, 42 U.S.C. 1437, et seq. ("Act") and the
Balanced Budget Downpayment Act, also known as the Continuing Resolution
("CR") passed by Congress on January 26, 1996, (PL 104-99. See H.R.
2880, Sec. 405). The purpose of this Contract is to provide housing
assistance payments on behalf of Eligible Families ("Families") leasing
decent, safe and sanitary units from the Owner.
1. Commencement Date, Term, Contract Units, and Contract Rents.
(a) Commencement Date of Contract. The effective date of this Contract
is ______. The date inserted must be the day after the
Expiring Contract expires. For example, if the Expiring Contract
expires on February 21, 1996, the date inserted must be February
22, 1996.
(b) Term of Contract. The term of this Contract is one year (365
days), beginning on the Commencement Date.
(c) Contract Units, and Contract Rents. This Contract is hereby
executed with respect to the units ("Contract Units") described in
Exhibit A listed by size and their applicable rents ("Contract
Rents").
2. Owner's Warranties
The Owner warrants that the rental units listed in Exhibit A are in
good and tenantable condition and meet HUD's Housing Quality
Standards.
3. Families To Be Housed; HUD Assistance.
(a) Families To Be Housed. The Contract Units are to be leased by the
Owner to eligible Very Low-Income Families ("Families") for
occupancy by such Families solely as private dwellings and as their
principal place of residence.
(b) HUD Assistance.
(1) HUD will be the Contract Administrator.
(2) HUD hereby agrees to make housing assistance payments on
behalf of Families for the Contract Units, to enable the
Families to lease decent, safe, and sanitary housing pursuant
to section 8 of the Act.
(3) If there is a Utility Allowance and if the Allowance exceeds
the total Family contribution, the Owner shall pay the Family
the amount of the excess. HUD will pay funds to the Owner in
trust solely for the purpose of making this payment. Any
pledge by the Owner of payments properly payable under this